The Importance of Tax

In this part, I am going to talk about the importance of tax. And you will find that what I talk are general ideas with some comparisons between US and PRC, however, in the next part, David will give you more practical examples.

Firstly, I’d like to use this quote to start my part. “Tax is everywhere in our life”. For individuals, we work and we pay income tax, we go shopping, to some extend, we pay the consumption tax. When it comes to companies, tax still plays an important role.

Generally speaking, no matter which country is, it is these points that make tax a key position in the corporate strategy.

Because…

>a big portion in companies’ expense

>almost every business activities involve paying tax

>business economic situation is affected by the changes of tax law

I will introduce these in the following power points.

1 a big portion in companies’ expense

As Fuyin mentioned, the tax system in US is different from it in China, in that case, companies need to pay tax to federal, state and local governments. Please notice that, the companies I talk here are those who are qualified for the criteria of taxpayers. So the total corporate income tax is approximately 40%.

In China, the CIT rate from 15% to 25%, it depends on what kind of enterprises are. The Hi-tech enterprises which do contribute to the country, for example, should be taxed on 15%.

2 almost every business activities involve paying tax

Value-added tax (VAT)

From the class, we know that VAT levied on corporation’s sale of goods, import of goods, processing, repair and replacement services. And the standard rate of VAT in China is 17 percent, while there are also reduced rates of 13 percent and 0 percent which apply to certain products or services, agricultural products, for example, are taxed at 13%. And the different criteria for VAT rates could be the key points for corporate to minimize its tax payment.

While the US does not impose a national VAT, most states, and some...